Oct. 26, 2018

NCUA Chairman touts payday loan alternative, bipartisan reg relief

A viable short-term loan program provided by credit unions could be an alternative to high-priced payday loans and a way to break the cycle of debt that traps millions of consumers, NCUA Board Chairman J. Mark McWatters said this week to a group meeting in Florida.

In remarks to the annual convention of the National Federation of Community Development Credit Unions (NFCDCU, which this week announced it has changed its name to “Inclusiv”), McWatters said demand for short-term, small dollar loans continues to be strong and consistent among credit unions. He told the group a short-term loan program could be a “first step in bringing the millions of unbanked and underserved populations into the credit union system.”

In May, the agency proposed amendments to its regulations on payday alternative loans that it said would give FCUs more market-based, payday alternative loan options. Comments on the proposal closed Aug. 3; the agency has not yet announced a final rule to be considered by the board.

Meanwhile, other federal agencies have also been acting on payday lending issues. Last week, the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB) said a proposal that could change its payday lending rule (set to kick in next August) is expected to be out for comment by the spring of 2019. In May, the OCC issued a bulletin encouraging banks and savings institutions to provide consumers short-term, small-dollar installment loans – and offered principles and polices to help them do so without running afoul of the bureau’s payday lending rule.

In other comments, McWatters told the group:

More than two dozen “substantive changes” to the agency’s structure – approved on a bipartisan basis by him (a Republican) and NCUA Board Member Rick Metsger (a Democrat) -- have resulted in less regulatory burden for credit unions, while “enhancing access to affordable financial services.” He also said the NCUA Board is working to revise the agency’s regulations to relieve the regulatory, reporting and examination burdens of federally insured credit unions.

The agency has awarded $2 million in Community Development Revolving Loan Fund (CDRLF) grants to 203 low-income credit unions, to be used for digital services and security programs, outreach to underserved areas, and leadership development and training for credit union staff.

… WHILE HIS STAFF CHIEF CHANGES PLANS – AND WILL STAY PUT

In an about-face, Sarah Vega – McWatters’ chief of staff – said this week that she would be staying at the agency, in her current position, and would not join a state credit union group which largely represents credit unions in New England. Two weeks ago, the Cooperative Credit Union Association (CCUA), which represents credit unions in Massachusetts, New Hampshire, Rhode Island and Delaware, announced Vega as its next president and CEO. But no start date was given in the announcement for Vega, a former state regulator (director of the Illinois Department of Financial Institutions) and NASCUS Chairman.

RATES OF ‘UNBANKED, UNDERBANKED’ HOUSEHOLDS FELL IN 2017

Households that are “unbanked” represent 6.5% of all those in the country, the FDIC reported this week – down from 2015 (the last time the survey was conducted) and the third straight period, the agency said, the percentage has declined. At the same time, the agency reported, mobile banking has increased at a “striking” rate.

In its 2017 biennial National Survey of Unbanked and Underbanked Households (the latest survey results released), the FDIC said the unbanked rate of 6.5% rate was the lowest recorded since the agency began conducting the survey in 2009. The survey from 2015 found 7% of households were unbanked, down from 2011 results of 8.2%. The agency said the declining rate was attributable – “almost entirely” -- to “socioeconomic circumstances of U.S. households.”

“Unbanked” means adults in the household do not have a checking or savings account at a financial institution. The FDIC said its survey results translate into 14.1 million adults in 8.4 million households do not have the accounts.

The survey results also covered “underbanked” households (meaning those households that had an account at an insured financial institution, but which also obtained “financial products or services outside of the banking system”). The number of underbanked households was down in 2017, the agency said, to 18.7% (or 48.9 million adults in 24.2 million households). In 2015, according to the report, 19.9% of households were counted as “underbanked.”

For mobile banking, the FDIC noted that method “continues to become an increasingly important way for consumers to access their accounts,” largely at the expense of tellers in banks – except for those with higher unbanked or underbanked rates. In 2017, the agency said, mobile banking was used by two in five of banked U.S. households to access their account. Four years ago, the agency reported, the rate of mobile banking users was 23.2%.

BCFP: CONSUMER COMPLAINTS TRENDING HIGHER

In yet another report this week, monthly consumer complaints about financial products and services were up an average of more than 9% per month in the first six months of 2018, compared to the previous year, according to new data released this week by the BCFP.

In its “Complaint Snapshot: 50 State Report,” the bureau stated that it has received nearly half a million consumer complaints (494,590) between January 2017 to the end of June 2018. The report notes that the top three states receiving complaints in 2017-MY 2018 were California, Florida and Texas; Wyoming had the fewest complaints received.

The bureau said it defines “consumer complaints” as submissions that “express dissatisfaction with, or communicate suspicion of wrongful conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service.” In the past, the “Complaint Snapshot” has listed the top complaints received, by topic, during each reporting period. This most recent report stops short of reporting 2018 totals, but does report the “top complaints” in volume by top five products since 2015, with a comparison of 2017 and 2016 complaints received.

Debt collection, according to that report, generated the highest volume of complaints, at 302,408 (with “Attempts to collect debt not owed” as the top issue within that category). According to the bureau, “debt collection” complaints made up 26% of all received in 2017 (versus 30% in 2016).

The bureau published an interpretive ruling Aug. 31 to explain the changes in requirements and procedures, updated its 2018 HMDA Filing Instructions Guide (FIG), and said it expected to initiate a notice-and-comment rulemaking later to incorporate the changes into Reg C “and further implement” EGRRCPA. (That additional rulemaking has yet to be published; see following item for more about a NASCUS summary on the interim rule).

The 2018 FIG gives technical guidance for reporting data collected in 2018 and reportable in 2019 via the loan/application register (LAR). The recent 2019 update to the guide will apply to data collected in 2019 and reportable in 2020. The 2019 FIG is available via the FFIEC HMDA Website, a site maintained by the umbrella FFIEC.

SUMMARIES LOOK AT REG RELIEF LAW’S CHANGES FOR BUREAU RULES

Two new summaries of recent actions by the BCFP – on partial exemptions HMDA disclosures, and summaries of rights under the Fair Credit Reporting Act (FCRA) – have been posted by NASCUS.

On the HMDA disclosures’ partial exemption, the NASCUS summary notes that the final rule (which implements provisions of this year’s regulatory relief legislation, EGRRCPA) provides clarification and guidance on several general items. The final rule notes that partially exempt institutions:

have the option to report data points covered by the partial exemption.

are not required to report 26 data points specified under this rule.

are required to report a non-universal loan identifier if they choose not to report a ULI.

In addition, the summary notes, the terms “closed end mortgage loan” and “open-end mortgage loan” include only loans and lines of credit that are otherwise reportable under HMDA.

Regarding summaries of rights under FCRA, the summary notes that the interim final rule took effect Sept. 21, but that the agency is taking comments on it (by Nov. 19) before making the rule final. In particular, the summary notes that EGRRCPA required that a new notice of rights be included whenever a consumer is required to receive a summary of rights under Section 609 of the FCRA. The new notice of rights is not currently reflected in the existing model forms (found in Appendices I and K) that were published in November 2012, the summary notes.

“The interim final rule amends the model forms to incorporate the new required notice of rights, amends the model form in Appendix I (‘Summary of Consumer Identity Theft Rights’) to reflect a statutory change to the minimum duration of initial fraud alerts and makes adjustments to update contact information for certain FCRA enforcement agencies in the model form in Appendix K (‘Summary of Consumer Rights’),” the summary points out.

FASB VOTES TO EXTEND CECL DATE BY 1 YEAR FOR NON-PBES (CUS)

The effective date of the Current Expected Credit Losses (CECL) standard for non-public business entities (PBEs) would be changed to fiscal years beginning after Dec. 15, 2021, the Financial Accounting Standards Board (FASB) agreed Wednesday. Both state and federally chartered credit unions are considered non-PBEs. The decision, which amends and includes interim periods within those years, pushes the effective date back for non-PBEs by one year (from 2020). The board made the decision after receiving comments – mostly from credit unions and their trade groups – during a period that ended Sept. 19. The standard uses an “expected loss” measurement for the recognition of credit losses. The Credit Union National Assn. (CUNA), state leagues and credit unions joined in submitting comment letters to the board advocating the change. (In the photo, members of FASB vote to extend the effective date for non-PBEs; click to see a short video of the final vote, or on the link below.)

STATE AGS URGE MULVANEY TO ENFORCE MLA

Reconsideration of abandoning enforcement by the BCFP of the Military Lending Act (MLA) was urged by 33 state attorneys general who signed a letter this week to the agency’s acting director. The letter, signed by Republicans and Democrats, also tells Acting Director John “Mick” Mulvaney that the agency would be failing to abide by its statutorily mandated duty to enforce the MLA “by restrictively interpreting its examination authority to preclude reviewing lenders’ compliance with the MLA.”

“Protection of our nation’s servicemembers against financial exploitation is a bedrock tenet of federal consumer financial protection law, and it traditionally has been a bipartisan effort,” the law enforcement leaders wrote. “The MLA ensures that servicemembers, many of whom have recently reached the age of majority and therefore have little experience in managing their own finances, are not saddled with unaffordable debt.

The attorneys general stated that eliminating the “proactive examination of compliance” to correct problems before they affect servicemembers, “your proposal will limit the CFPB’s protection of servicemembers to reactive enforcement when servicemembers submit complaints.”

The December meeting of the NCUA Board has been rescheduled for one week earlier, to Dec. 13, the agency said this week. The agency gave no reason for moving the meeting from Dec. 20. It will be at 10 a.m. and will be live-streamed via the Internet … The Conference of State Bank Supervisors (CSBS) Thursday filed a complaint in the U.S. District Court for the District of Columbia against the OCC seeking to prevent the agency from granting national bank charters to entities that operate as nonbanks, arguing that such charters exceed the authority granted by Congress, the association announced. This is the second time the group has filed suit; a previous effort was thrown out of court … It’s less than two weeks away: NASCUS 101. Learn more about NASCUS and the benefits it offers to credit unions and other state credit union system players – directly from those who reap those benefits in a Nov. 1 “NASCUS 101,” a no-charge event featuring an overview of the rewards of membership in the association. In addition, the fact-packed, one-hour session offers insights about: Unique tools and resources to make work at members organization easier; NASCUS collaborations with credit union leagues and system partners; and the unique membership model and how it benefits the state system.